There’s very little that Renaissance man Peter Costello can’t do, apparently: former federal treasurer, Liberal Party elder, media chairman, Future Fund chairman and now… sociologist.
Via the Nine staff newsletter, Costello has diagnosed the rise of populism around the world as the consequence of central banks holding interest rates down. Low interest rates have “exacerbated this division between people with assets and people without assets … what’s going on at the moment is also exacerbating a division between savers and borrowers.” Having successfully diagnosed the problem, Costello prescribed the cure: deregulation. “I would argue monetary policy has run its course, fiscal policy has run its course, what we have to do now … is take away some of the handbrakes that are now applying to the economy … there has been a very big build-up in regulation in this country.”
The rise of populism has vexed politicians, economists, business people and sundry commentators the world over in recent years. Some of us have written books about it. Costello’s take at least has the refreshing character of novelty. But we confess we’re having difficulty following it.
We’re happy to put aside that as a politician Costello happily campaigned under the claim — wrong, as it turned out — that interest rates would always be lower under the Coalition. But his thesis seems to be that “sophisticated people” who borrow to acquire assets have benefited from low interest rates, while “poor people” (presumably too unsophisticated to borrow money?) haven’t.
Except… it’s lower interest rates that help low-income people acquire “assets” like housing. And right now, it’s low-income people who are benefiting from low interest rates by making their mortgages cheaper, while people with assets, like wealthy Liberal-voting retirees, are whining that the low-interest rate environment means their returns are lower than they’re used to.
As for his prescription of deregulation, what kind of deregulation would he like? Industrial relations deregulation, like his WorkChoices program? That smashed labour productivity and drove the Howard government from office. How about financial services deregulation and the neutering of financial regulators, which Costello also presided over as treasurer? That was an inspired idea — we’re still counting the cost in billions in compensation from the big banks, hundreds of thousands of ripped-off customers, discredited regulators, hundreds of shattered lives and a banking sector that has fled from the integrated service model Costello helped them construct. How about energy deregulation? Yep, another winner from the ’90s and ’00s — so much so that Costello’s successors have introduced the most dramatic interventionist program in recent Australian history as a response.
Indeed, this is where Costello manages the impressive feat of being fundamentally wrong both in diagnosis and prescription. It was exactly the policy agenda that he presided over that helped create populism and the disgust for neoliberalism that his successors are now having to deal with via increased regulation.
The Howard-Costello agenda of deregulation, stripping industrial relations protections, destroying unions, undermining regulators and handing ever-greater power to corporations was what created the furious resentment of voters in recent years in Australia, as it did in other countries. They were furious because they endured wage stagnation imposed by powerful corporations while those corporations ripped them off, and avoided and evaded tax, while governments did nothing — or in the case of Howard and Costello, cheered them on.
Voters felt powerless in a political and economic system that worked for corporations and the politicians, like Costello, that they funded; inevitably, many turned to self-styled outsiders like Pauline Hanson or Donald Trump who promised to shake the whole system up.
Blaming central banks for trying to use monetary policy to address stagnation is a distraction from the real culprits — smirking neoliberal politicians who let corporations abuse their power so much that eventually electorates exploded in rage. That’s you, Pete.